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NOVAGOLD reports 3Q21 financial results

Published by , Editor
Global Mining Review,

NOVAGOLD Resources Inc. has released its 3Q21 financial results and an update on its Tier One1 Donlin Gold project, which NOVAGOLD owns equally with Barrick Gold Corp.

3Q21 highlights and updates

  • The 2021 Donlin Gold drill programme site activities are wrapping up for the year.
    • Assays from 29 holes (18 complete and 11 partial), encompassing approximately 7500 m of drilling, were disclosed in a joint Barrick-NOVAGOLD media release dated 2 September 2021.
    • The drilling was completed in late September, consisting of 79 holes totalling approximately 24 200 m.
    • The programme revealed significant high-grade drill-hole intercepts, particularly in ACMA and in the Divide zone, pointing toward potential feeder zones of this large system.
    • Examples of high-grade drill-hole intercepts include:
      • Drill-hole DC-1970: 92.02 m grading 7.8 g/t gold.
      • Drill-hole DC21-1963A: 40.97 m grading 10.5 g/t gold.
      • Drill-hole DC-1969: 47.78 m grading 9 g/t gold.
  • In order to minimise the risks posed by COVID-19, NOVAGOLD is continuing to maintain a wide-ranging set of health and safety policies at its offices, and, in conjunction with Barrick, at Donlin Gold. These measures are designed to ensure the safety and well-being of all employees, contractors and all individuals associated with the company.
    • In August 2021, Donlin Gold enhanced its Community and Workforce Protection Plan to ensure the safety and well-being of its workforce, employees’ families, and local communities for the remainder of the 2021 field season. Employees and contractors are subject to mandatory COVID-19 testing prior to traveling to camp as well as upon arrival.
  • Donlin Gold employed a local workforce from 20 Yukon-Kuskokwim (Y-K) communities for the 2021 season – approximately 70% of Donlin Gold direct hires for this year’s drill program were Alaska Natives. Donlin Gold, together with its Native Corporation partners Calista Corp. and The Kuskokwim Corp. (TKC), carried out a wide range of community engagement and support initiatives during the quarter:
    • In August 2021, Donlin Gold partnered with the Delta Backhaul Company, Association of Village Council Presidents (AVCP), and other regional partners on the fourth ‘In It For The Long Haul’ backhaul project to collect, remove, and safely dispose of approximately 180 000 lbs of household hazardous and electronic waste from 26 Y-K villages.
    • Finalised a shared value statement with Upper Kalskag for a total of eight shared value statements in the Y-K region.
  • Advancing State permitting, methodically:
    • All 12 water rights permits were finalised and issued by ADNR’s Division of Mining Land and Water on 29 June 2021. In July, the water rights permit issuance was administratively appealed by an environmental non-governmental organisation (ENGO) representing five tribal groups in the Y-K region. A decision on the appeal is anticipated in 2022.
    • In April 2020, the ADNR’s Division of Oil and Gas agreed to reconsider its decision on the State ROW for the buried natural gas pipeline. On 19 July 2021, the ADNR Commissioner completed the reconsideration and upheld the State ROW. In September, two appeals of the State ROW were filed in Alaska Superior Court, one by an ENGO representing several tribal groups and one by an outdoor recreational business owner in the pipeline area.
    • In June 2021, the Clean Water Act (CWA) Section 401 certification of the CWA Section 404 permit was appealed in Alaska Superior Court by an ENGO representing Orutsararmiut Native Council (ONC).

Financial results

For the third quarter ended 31 August 2021, loss from operations increased from US$10.9 million in 2020 to US$11.6 million in 2021, primarily due to higher permitting and legal costs at Donlin Gold LLC. For the first nine months of 2021, loss from operations increased from US$25.3 million in 2020 to US$28.1 million in 2021 due to higher general and administrative expense and higher costs at Donlin Gold LLC. General and administrative expense increased by US$1.4 million primarily due to higher share-based compensation, salaries, and benefits. At Donlin Gold, expenses increased by US$1.5 million in 2021 due to higher permitting and legal costs.

In the first nine months of 2021, total cash, cash equivalents, and term deposits increased by US$51.4 million due to the receipt of US$75 million from Newmont, partially offset by US$15 million used to fund Donlin Gold, US$8.4 million used in operating activities for administrative costs and working capital changes, and US$0.7 million related to withholding taxes paid on vested performance share units. Effects of exchange rate changes increased cash by US$0.6 million.

Under the terms of the sale of the Galore Creek project to Newmont on 27 July 2018, NOVAGOLD received US$100 million. An additional US$75 million was received on 27 July 2021. A further US$25 million is due upon the earlier of:

  1. Completion of a project feasibility study prepared by or for the Galore Creek project.
  2. 27 July 2023: An additional US$75 million payment is contingent upon Galore Creek project construction approval.

In the first nine months in 2021, net cash used in operating activities increased by US$1 million compared to the same period in 2020, primarily due to lower interest income. Net cash provided from (used in) investing activities includes the US$75 million note payment from Newmont and net proceeds of US$5.2 million from term deposits in 2021, partially offset by a US$1.4 million increase in Donlin Gold funding. Net cash used in financing activities related to withholding taxes paid on vested performance share units.

As of 31 August 2021, the company had cash and cash equivalents of US$117.8 million and term deposits of US$55.5 million. The term deposits are denominated in US or Canadian dollars and are held at Canadian chartered banks. Additional capital will be necessary if a decision to commence engineering and construction is reached for the Donlin Gold project.

2021 outlook

The company anticipate spending approximately US$32 million in 2021, which includes US$19 million to fund its share of expenditures at the Donlin Gold project (US$12 million for the 2021 drilling programme, camp improvements and studies; US$7 million for permitting, community engagement and administration); and US$13 million for corporate general and administrative costs.

NOVAGOLD’s primary goals in 2021 are to continue to advance the Donlin Gold project toward a construction decision; maintain/increase support for Donlin Gold among the project’s stakeholders; promote a strong safety, sustainability, and environmental culture; maintain a favourable reputation of NOVAGOLD, its governance practices, and its project among shareholders; and manage the company treasury effectively and efficiently, including streamlining the corporate structure.

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